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Yes
87% (212)

No
13% (31)

243 total votes.

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See how much San Diego Unified has spent over five years on health care, and administrative fees, with the chart on Page 3 of this story.

Late in the summer of 2010, as the San Diego Unified School District waded through yet another patch of budgetary quicksand, trustees gathered behind closed doors to talk about spiraling health care costs.

Annual expenses had spiked to $167 million, by far the biggest cost short of payroll. A Los Angeles County firm was telling the board it could save the district almost $10 million a year by taking over the system.

The district’s two biggest unions opposed the proposal by Keenan & Associates, and it was scrapped without so much as a public hearing.

Now some of the same elected officials are considering eliminating 1,639 teaching jobs — plus more than 300 non-teaching positions — to balance next year’s $1.1 billion budget. Class sizes in middle school would rise as high as 40.

“I wish our schools were adequately funded so we didn’t have to make all these cuts,” said Karen Speck, president of the Ninth District PTA in San Diego and Imperial counties. “We all have an expectation that school districts and unions are putting politics aside so that every possible dollar can be used in the classroom.”

The district’s health care services have been managed by a nonprofit organization called the California Schools Voluntary Employees Benefits Association for nearly 20 years. The school board never put the agreement out to bid, even though best practices call for public agencies to solicit new bids for big-ticket contracts every three to five years.

Such associations are typically formed to create buying power for smaller school districts. San Diego is alone among the 10 largest California school districts in not negotiating and buying directly from health insurers like Kaiser and Blue Cross.

The nonprofit trust known as VEBA is a not a traditional charity. The tax-exempt organization has no staff, yet handles revenue of $355 million a year. It is governed by a volunteer board comprised of an equal number of school administrators and union leaders from around the region.

San Diego Unified, which contributes nearly half of the money paid into the trust each year, is represented by one of 16 seats on the VEBA board.

The association has hired McGregor & Associates, a Mission Valley consulting firm, to negotiate deals and process claims with carriers for San Diego Unified and other member school districts. George McGregor, the McGregor & Associates principal, said VEBA provides its members excellent health care at competitive rates.

School board member Richard Barrera was serving as president in 2010, when the Keenan report was discussed and shelved.

He said administrators never tried to verify Keenan’s claims of how much it could save, partly because officials did not trust the company and also because labor groups opposed any move away from VEBA.

“If the unions had been amenable to doing that, then I would have supported looking for an outside analysis,” Barrera said. “I don’t put any stock in Keenan, who wants a contract, to tell us how much money they are going to save us.”

Any unilateral effort to leave VEBA would be seen as a ”backdoor attempt by the district to change the health plan” and to downgrade the unions’ voice inmanaging health benefits, he said.

Trustee Scott Barnett disagrees. Even if VEBA is doing a stellar job, the health-care contract should be competitively bid as soon as possible, he said.

“We’re looking at a $124 million budget shortfall for next year,” said Barnett, a former head of the county taxpayers association who was elected in November 2010. “If we can get the same level of service for better costs, then why wouldn’t we pursue it?”

Twice last year, a panel of staff, experts and volunteers set up by the district to find ways to trim costs or raise revenues told board members they should review VEBA fees.

“Is the district overpaying for administrative services it is not receiving?” the group asked, noting that union contracts require the use of VEBA for benefits. “Since VEBA is the only allowed medical insurance purchasing option, how does the district know it’s getting the best deal?”

Like most employers, San Diego Unified has seen its health care bills climb.

In 2006-07, the district spent $131.1 million on benefits, an average of $8,952 per employee. By 2010-11, those expenses rose 37 percent, to $166.9 million, or $12,240 per employee.

By comparison, the Santa Ana Unified School District spent $63.7 million on health care in 2010-11, an average of $11,680 per employee. Those costs include dental and vision benefits, which VEBA does not provide to San Diego Unified.

Santa Ana manages its health care using its staff. San Diego pays administrative fees for VEBA to handle its insurance, and the fee has climbed over the same five-year period from $987,500 to $1.1 million.

Former trustee John de Beck was a key player in establishing the VEBA trust nearly 20 years ago.

“Since college, I always believed co-ops and credit unions were a better way of delivering services,” said de Beck, who was serving on the VEBA board when he lost his school board seat to Barnett in 2010. “Unions liked it not because cost savings would be good for the district, but because savings would go back into salaries,” he said.

Former trustee Katherine Nakamura said she fought for years to get a second opinion about the district’s VEBA membership.

“The Board of Education most certainly should have put this out to bid,” said Nakamura, who was defeated for a third term in 2010. “I tried very hard to make that happen. It didn’t.”

Ron Little, the district’s chief financial officer, sits on the VEBA board of directors. He said the district’s labor contracts are unusual in that they designate a specific organization for obtaining health benefits.

“In all my years in school finance, I have not heard of trust and plan administrators being specifically identified in negotiated agreements,” Little said.

San Diego Education Association president Bill Freeman opposes putting the deal out to bid. He said a lower offer might pressure trustees to hire a new provider and the level of benefits might sink.

“I don’t want to test the waters and cost these members hundreds or thousands of dollars,” he said. “If it’s not broken, don’t fix it.”

Leticia Munguia of the California School Employees Association said her members worry that switching managers could drive up co-payments for seeing a doctor or filling prescriptions.

She also said alternative plans do not spell out where savings would be realized, and noted that Keenan is a for-profit company while the trust puts any additional income back into member benefits.